Stewardship & influence: Good, bad or indifferent?

Executive Summary

• Active ownership—beyond proxy voting—is central to translating stewardship into real change.

• Stewardship must move from compliance to influence: through structured engagement, escalation, collective initiatives, and asset owner leadership.

• Good examples of stewardship have led directly to improved corporate strategy, disclosure, governance, and in some cases financial outperformance or risk mitigation.

• Poor or superficial stewardship (“box-ticking”) can backfire: reputational backlash, misalignment with fiduciary duty, and underperformance.

• We offer a framework and recommendations for stewardship that genuinely drives systemic change.

Introduction

In today’s capital markets, the pressure on investors to show ESG credentials is intense. But increasing numbers of institutional investors are realizing that mere proxy voting is insufficient. The systemic challenges—climate change, biodiversity loss, inequality, digital risk, governance breakdowns—demand deeper, sustained intervention by investors. This is where active ownership becomes vital: using the rights, voice, influence, and capital allocations of shareholders to shape corporate behavior, not just react to it.

In this paper, we lay out a framework for high-impact stewardship, illustrated with real cases of good and bad stewardship and their investment outcomes. The aim: to arm asset owners, asset managers, and stewardship teams with practical lessons for influencing systemic change.

The Stewardship Continuum: From Passive to Transformative

To anchor the discussion, it helps to think of stewardship as a continuum rather than a binary. At one end is passivity—shareholders who do little more than hold and vote routinely. At the other is transformative engagement, in which investors actively shape corporate decisions, escalate when needed, and coordinate across the investment ecosystem.

Some middle stages often seen in practice:

1. Voting only / passive oversight

2. Reactive engagement (after problems arise)

3. Proactive thematic engagement (aligned with risk framework)

4. Escalation and activism hybrids

5. Collective engagement and systems influence

The value of distinguishing these stages is that only in stages 3–5 do you see leverage for systemic change (not simply incremental improvements at individual firms).

Framework for High-Impact Stewardship

Below is a conceptual framework, against which we can evaluate real cases and build recommendations.

PillarKey ActivitiesIndicators of High ImpactClear Objectives & MaterialityDefine what “success” looks like (e.g. emissions targets, board changes, supply chain standards)Objectives are SMART (specific, measurable, timebound), tied to investment riskDialogue & Relationship BuildingMultiple touchpoints, trust-building, internal championsCEO/Board commit to timeline and metricsEscalation PathwayPre-defined escalation steps (e.g. public letters, voting against, co-filing resolutions, divestment)When companies fail to respond, escalate visiblyCollective Action & Coalition BuildingPartner with other investors, join engagement initiativesCoalition-led asks with clear benchmarksCapital Allocation DisciplineConsequences (or rewards) in weighting decisions based on engagement outcomesUnderweight or divest when no progress; overweight when leadership improvesMonitoring, Metrics & ReportingTrack engagement inputs, outcomes, reinvestor feedbackPublic case studies, outcome reporting, lessons learnedPolicy & Ecosystem EngagementAdvocacy for regulation, disclosure mandates, standardsInfluence regulatory frameworks to shape corporate incentives

A stewardship program that addresses all these pillars is more likely to create durable impact.

Examples: Good and Bad Stewardship in Practice

Below are illustrative cases—some from published stewardship reports or academic literature—highlighting what works and what doesn't.

Good Stewardship Examples

1. Engagement on coal and climate transition (UK / Europe asset manager case)
   In the IA “Stewardship in Practice” survey, asset managers reported that they had engaged in 53 in-depth dialogues with coal-intensive companies, with the intention of setting clear expectations or divesting if progress was insufficient. The Investment Association

   • In some cases, this engagement triggered improved disclosure, adjustment of capital expenditure away from coal, and better alignment with transition pathways.

   • One asset manager, frustrated by lack of movement, divested. This sends a credible signal: engagement must lead to consequences.

   • Over 80% of respondents said that engagement “led to better investment decisions,” in many cases by surfacing risks or mispricings earlier. The Investment Association

2. Living wage / workforce engagement
   Also from the IA survey, a firm engaged with a company on the issue of living wage and retention. The result: the company raised the base wage for 700 workers. The Investment Association

   • This is a smaller-scale example, but meaningful: aligning social outcomes and improving morale, potentially reducing turnover costs, reputational risk, and regulatory scrutiny.

3. Board succession and remuneration reform
   Another example: an asset manager repeatedly engaged with a company over excessive chairman tenure (former CEO, high fees). They combined voting pressure with public commentary and other signals. Eventually, the board agreed to step down and start a formal succession process. The Investment Association

   • The success wasn’t instant—but the investment team continued to monitor, track candidate appointments, and hold the company to account.

   • For the firm, this could reduce governance risk (excessive concentration of power, nepotism, lack of fresh oversight).

4. Collective climate engagement: Climate Action 100+
   While not a single “case study,” the Climate Action 100+ initiative is widely cited as a model of collective engagement. It aggregates investor influence, sets benchmarks, pushes for robust transition plans, and publicly tracks corporate progress or laggards.

   • In some cases, companies that were lagging have changed board oversight of climate, improved target setting, and committed to more ambitious capital allocation changes.

   • Because the initiative mobilizes many investors, it creates reputational and financial incentives for laggards to act.

   • This model shows that individual investors gain leverage via coalition rather than relying solely on bilateral influence.

Bad or Weak Stewardship / “Wash” Stewardship Examples

1. Superficial engagement with no escalation
   Some stewardship reports show that many engagements stop at the “one-off letter” or a single meeting, with no follow-up or escalation. In the IA survey, ~50% of engagements were only a one-off communication. The Investment Association

   • Without follow-through, such engagement offers little leverage and may even be ignored by companies as low-commitment noise.

2. “Greenwashing” through shallow ESG promises
   In certain cases, companies have responded with high-level commitments (e.g. “net-zero by 2050,” “carbon neutral”) but without any binding metrics, transition capital expenditures, or credible roadmaps.

   • Investors who accept these statements without demanding substance risk being misled, losing credibility, and damaging performance if the promises prove hollow.

   • The broader critique is that stewardship becomes more about optics than substance, especially when engagement is not transparent, lacks real consequences, or is disconnected from capital allocation.

3. Bad activism / short-term focus
   As academic literature notes, stewardship can degenerate into “bad activism” if investors push for short-term value extraction or governance changes that help near-term returns but undermine long-term stability. Taylor & Francis Online+1

   • For example, demanding aggressive cost cuts or financial engineering without regard to ESG resilience can backfire when latent risks surface.

   • Some engage as “activists” in bulldozer mode but lack the patience or alignment with long-term strategy, causing disruption and reputational risk.

4. Lack of coordination & contradictory votes
   A recognized pitfall is when a manager belongs to a collective engagement but then votes contrary to coalition proposals (the “free rider” problem). Some stewardship codes flag this as poor discipline. The Investment Association

   • This erodes credibility and reduces future coalition influence.

   • Worse, it confuses the investment message: the company may see such inconsistency as weakening the ask.

5. Passive reversal under regulatory or political pressure
   In certain jurisdictions, mounting regulatory or political backlash against ESG activism has chilled investor engagement. The article “SI Debate: Stewardship is dead, long live stewardship!” notes that companies may even threaten lawsuits against activist shareholders (e.g. ExxonMobil vs. Arjuna Capital) and that some investors are retreating from vocal public stewardship. Robeco.com - The investment engineers

   • This dynamic can force investors to adopt quieter, less escalated strategies—perhaps reducing their leverage.

Investment Impacts: What the Evidence Suggests

The cases above illustrate qualitative dynamics; what about measurable investment impact?

• Risk mitigation and early signal detection: Good stewardship can surface risks early (e.g. stranded assets, legal exposure, reputational issues) and thus help avoid large losses.

• In the IA survey, 82% of asset managers said that engagement led to better investment decisions (some “considerably so”). The Investment Association

• Return enhancement via influence: If a company responds to investor pressure by improving capital allocation, reducing environmental liabilities, or strengthening governance, that can translate into improved margins or valuation multiples.

• Reversals from negative events: Weak stewardship can leave investors exposed to ESG events (e.g. controversies, litigations, regulatory fines). For example, the event-study on ESG reputational risk via social media finds that ESG risk events (social media spikes) lead to average abnormal negative returns (~ –0.29%) around the event window. arXiv

• Investor confidence, inflows, and reputation: Active and credible stewardship can attract capital, particularly from ESG-conscious clients or institutions, lowering fundraising costs and improving perception. Conversely, stewardship failures or scandals can trigger withdrawals or reputational damage.

• Systemic cost externalization: When companies are allowed to externalize ESG costs (pollution, biodiversity harm, labor abuse), investors bear the latent liability. Stewardship demands internalizing these costs, which strengthens valuation resilience.

While robust empirical causal inference is still limited, the directional logic is strong: stewardship that drives real change helps tilt the balance of risk and return in favor of long-term investors.

Recommendations for Stewardship Leaders

Based on the framework and lessons above, here are practical recommendations:

1. Anchor engagement in materiality and investment risk
   Avoid broad or moralistic demands. Focus on ESG issues that clearly affect cash flows, capital costs, and resilience (e.g. climate, governance, supply chain, regulation risk).

2. Define clear escalation paths in advance
   For every engagement, predefine thresholds or triggers (no progress by X quarter, refusal to meet, non-disclosure) that prompt escalation.

3. Align voting and engagement to send consistent signals
   Votes against directors or remuneration should reflect unresolved engagement issues, not be standalone symbolic acts.

4. Join or lead collective initiatives—but hold alignment
   Coalitions like Climate Action 100+ or human rights alliances amplify reach. But maintain internal discipline: ensure your voting aligns with coalition asks unless you publicly explain deviation.

5. Embed stewardship outcomes in portfolio decisions
   Treat engagement outcomes as a factor in overweight/underweight decisions, rebalancing toward responsive, improving companies.

6. Develop robust reporting and accountability
   Publish case studies (good and bad), show metrics on both input (meetings, letters) and outcomes (company changes, KPIs), and track “lessons learned” loops.

7. Resist reputational or litigation deterrence
   Stewardship can provoke pushback. Institutional investors must plan for — and be willing to absorb — political or legal resistance, rather than retract.

8. Ensure resources and capability
   High-impact stewardship demands ESG specialists, escalation capacity, legal support, and data systems to monitor engagements over long horizons.

9. Engage policy and ecosystem change
   Don’t only engage companies—engage regulators, standard-setters, trade bodies, and civil society to reshape the incentives shaping corporate behavior.

10. Continuous learning and iteration
    Stewardship is an evolving practice. Capture failed attempts, refine approaches, invest in training, and benchmark against peers.

Conclusion

In the investment ecosystem, stewardship is no longer optional or cosmetic—it is a strategic necessity. As ESG risks deepen, passive ownership will leave institutional investors increasingly exposed. The real leverage lies in active ownership: structured engagement, escalation, coalition-building, and capital consequence.

Past examples show that well-executed stewardship can shift corporate strategy, strengthen governance, and reduce liability exposure. Conversely, weak or superficial stewardship invites ridicule, investor disillusionment, and potential losses.

More than ever, asset owners and managers must treat stewardship as a core investment tool—not a reporting add-on. The challenge is to transform stewardship from rhetoric to results, from isolated votes to system-level influence. If they succeed, they can help redirect capital toward a more sustainable, equitable, and resilient economy.